Friday, January 7, 2011



Illinois House Speaker Mike Madigan and his north side errand boy Senate President John Cullerton are about to force the largest tax hike in the state’s history through a lame-duck session of the legislature. The package includes a “temporary” 75% hike in the state income tax (from 3% to 5.25%), scheduled to fall to a mere 25% hike (from 3% to 3.75%) in four years. We all know how “temporary” tax increases tend to be not so temporary as the end of their tenure approaches, but I digress. Corporate tax rates would likewise “temporarily” increase a similar 75%, from 4.8% to 8.4%. The proceeds from these extortionate tax increases would be used to back the bonds used to pay the state’s overdue bills and to fund its enormous pension liabilities. But some of the money will be used for property tax credits this year and for, as the Chicago Tribune called it, “writing checks to taxpayers” in subsequent years, giving this tax increase the odor of a massive income redistribution scheme. Proceeds from a $1.00 per pack hike in the cigarette tax will go into a “lock box” for “education funding.” Even if one is in the camp that deems any expenditure worthy, regardless of its fatuousness, as long as it is labeled “for educational purposes only,” or some such drivel, one has to be suspicious of the rigidity and sturdiness of such political “lock boxes,” but, again, I digress.

As one predisposed to oppose any tax increases, one would think that I would be adamantly opposed to this one, and I am, to an extent. But the reality is that the politicians that we have sent to Springfield have already spent the money. Illinois, like all other states, has a balanced budget law, albeit a silly one that somehow allows budgets to be “balanced” by borrowing. The reality is, however, that the state of Illinois, unlike the federal government, does not have an appendage like the Fed that stands ever ready to finance its extravagance with money created out of thin air, and therefore must pay its bills in a reasonably honest manner. Therefore, given that our deficits are so huge in this state that there is no hope of growing our way out of them, and legal restrictions are in place that make doing so impossible, we have no choice but to raise taxes.

Speaker Madigan formerly insisted on Republican votes before he would pass such a package, even though those votes are unnecessary, given his majorities in both branches of the legislature. That insistence seems to be fading and it is highly unlikely that he will get many, if any, GOP votes for this abomination. The Republicans protest that these problems developed when they were in the minority and were shut out of the decision making process on spending by the autocratic Mr. Madigan. The GOPers have a partial, but only a partial, point. Though our budget problems were greatly exacerbated under Governors Blagojevich and Quinn, their Republican predecessors were not paragons of fiscal virtue themselves. Furthermore, the state’s most serious, if not immediate, budget problems lie in the pension liabilities that arose from the generous benefits packages doled out to the state’s employees by both Republican and Democratic administrations. Note that Governors Thompson and Edgar, both GOPers, did not get to preen with union leaders after some token endorsement for nothing. And even under Governors Quinn and Blagojevich, the opposition offered by the Republicans to massive spending was token, at best. Note that when any spending is somehow, no matter how convolutedly, labeled as being “for education” and/or for “our kids,” the GOPers somehow lose their fealty to fiscal rectitude. After all, who wants to deny “our kids” access to such education vitals as, say, a new steam room for the gym, a second or third observatory, or a deeper swimming pool.

So, yes, these tax increases are appalling. One of the few things Illinois had going for it in attracting business was a low, flat personal income tax rate. That advantage is about to disappear. This is a shame. But this increase became inevitable once the money was spent at the prodigious rate it has been excreted away by the pols we routinely send to Springfield to build their little, and in a few cases huge, empires.

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